Victoria’s battery storage won’t be ready for this summer

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Victoria will likely go without its much-vaunted battery storage installations this summer, following months of delays likely to be centred around finance and contracting.

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Victoria’s plans to add at least 100MWh of battery storage to its grid by January – to help keep the network steady and prevent unwanted load-shedding – appear to have come unstuck.

The state government – which this week unveiled the details of the country’s biggest renewable energy auction (650MW) – has still to announce the results of its much vaunted earlier tender for two large scale battery storage installations in the west of the state.

The two projects – each of 20MW and producing a combined 100MWh – were supposed to be online by January 1. But despite attracting more than 100 proposals, the tender winners have still not been announced, way beyond the planned deadline of the end of the August.

A spokesperson for minister for energy Lily D’Ambrosio said the government is still assessing proposals and further announcements will be made in due course.

“We’re making sure Victoria is equipped with the next generation of energy technologies that will support a more resilient energy system,” the spokesperson said in an emailed statement.

The assumed presence of the two batteries formed a key part of the strategy drawn up by the Australian Energy Market Operator to ensure the lights stayed on in Victoria this summer – the first summer without the big Hazelwood brown coal generator that closed down earlier this year.

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Victoria and South Australia are considered the states most exposed to potential outages this summer, although South Australia has successfully installed emergency back-up generators, and the Tesla big battery at Jamestown appears to be on track to operate by December 1.

Indeed, SA energy minister Tom Koutsantonis said last week that NSW – which he said had the highest penetration of coal power anywhere in the world – had more to worry about this summer, particularly after its near misses earlier this year when its biggest coal and gas plants failed.

A spokesman for AEMO indicated that the organisation was not unduly worried about the absence of the storage in Victoria.

“AEMO has been working to procure approximately 1000 megawatts of strategic reserves through the Reliability and Emergency Reserve Trader (RERT) process amongst other initiatives,” he said.

“We are supportive of any additional storage capacity in Victoria, however we will not be relying on its capacity for this summer.” Apart from reserve capacity put in place, AEMO will be drawing on significant amounts of demand management.

The short-listed applicants for the Victoria battery storage tender have not been identified and neither have the reasons for the delay. The tender documents suggested negotiations would wrap within a few weeks of the short-list being identified in early August.

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But it is assumed that the issue must be about money, and whether the total of $25 million of grant funding proposed by the government was enough to overcome the lack of incentives for battery storage in the broader wholesale market.

Singapore-Based Nexif Energy made an interesting point earlier this week after announcing its plan to install 10MW/10MWh of lithium ion battery storage next to its Lincoln Gap wind farm in South Australia, and possible expand it three fold in the second stage.

Nexus’s Zeki Akbas said battery storage as a stand-alone business was not yet sustainable as a business proposition, but probably was as part of a wind or solar project where it could get added revenue from “time-shifting” the output and pushing more towards peak pricing periods.

This is largely because the market for network and ancillary services is not yet developed in Australia, and rules that would further encourage battery storage over gas peaking stations – such as 5-minute settlements – have been pushed out to 2021 or beyond.

This is why Australia’s biggest battery storage project – the Tesla big battery in South Australia – is reliant on government contracting and funding to make its business case (and will not actually be able to time shift the output of the already contracted Hornsdale wind farm).

The smaller Wattle Point battery project (also adjacent to a wind farm) is also receiving ARENA funding, and will provide services such as time shifting, fast response and local micro-grid back-up in the case of a broader outage.

Another big battery storage project – the 100MW/100MWh put forward by Liberty Onesteel for its Whyala steelworks – will be part of a comprehensive “behind the meter” solution that includes solar, pumped hydro and demand management.

It is likely that Victoria can resolve the issue – either by clarity through contracting specific services or perhaps some extra money. The suggestion is that a further announcement will be made before the end of the year.

That won’t get a battery installed by January 1, or even before the end of summer, but storage will be essential to its plans of reaching 40 per cent renewables by 2025, and the sooner it starts the better.

Nexif Energy’s Akbas also pointed to the issue surrounding connection agreements, and the challenges facing network operators and the market operator to incorporate these technologies into the grid for the first time.

Conergy’s Lakeland solar and storage project in north Queensland- the first such project to be connected to the main grid – has suffered numerous delays as the market operator and local network wrestle with various connection issues.

The situation is further complicated because of the varying attributes of energy storage – which can be used for a range of options including reinforcing grid infrastructure, deferring network spending, providing network services such as frequency control, time shifting renewables and creating isolated micro-grids.

 

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